Tribunal upholds Financial Creditor's Section 7 application, dismissing challenge on maintainability and affirming right to issue Acceleration Notice.

The Tribunal upheld the Adjudicating Authority's decision to admit the Section 7 application by the Financial Creditor, rejecting the challenge to its maintainability. It affirmed the Financial Creditor's right to issue the Acceleration Notice and initiate proceedings based on the Debenture Trustee Document and Inter-Creditor Agreement. The Tribunal found the debt and default undisputed, dismissing the appeal and confirming the Adjudicating Authority's order.

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Issues Involved:
1. Maintainability of Section 7 Application by Financial Creditor.
2. Locus Standi of Financial Creditor to Issue Acceleration Notice.
3. Admissibility of Debt and Default by Corporate Debtor.
4. Compliance with Debenture Trustee Document and Inter-Creditor Agreement.

Summary:

Issue 1: Maintainability of Section 7 Application by Financial Creditor
The Appellant challenged the maintainability of the Section 7 application filed by Catalyst Trusteeship Ltd., arguing that only the Debenture Trustee, Vistra ITCL, was entitled to initiate proceedings against the Corporate Debtor. The Adjudicating Authority admitted the Section 7 application, leading to the present appeal.

Issue 2: Locus Standi of Financial Creditor to Issue Acceleration Notice
The Appellant contended that Respondent No.1 lacked the locus to issue the Acceleration Notice dated 26.07.2022, asserting that only the Debenture Trustee could act in the event of default. However, the Tribunal found that the Financial Creditor was fully entitled to issue the Acceleration Notice as per Clause 9.8 of the Debenture Trustee Document, which allows the lender to take all actions and seek remedies available under applicable laws. The Debenture Trustee had already issued a Demand Notice on 13.07.2022, making the Corporate Debtor liable to comply.

Issue 3: Admissibility of Debt and Default by Corporate Debtor
The Corporate Debtor did not dispute the debt and default in its reply before the Adjudicating Authority. The Tribunal noted that the Corporate Debtor admitted the debt and default, citing business standstill due to COVID-19. The Tribunal concluded that the debt and default were undisputed and clearly proved.

Issue 4: Compliance with Debenture Trustee Document and Inter-Creditor Agreement
The Tribunal examined clauses from the Debenture Trustee Document and the Inter-Creditor Agreement. It concluded that the Financial Creditor had the right to issue the Acceleration Notice and initiate proceedings under Section 7. The Tribunal highlighted that the Financial Creditor had stepped into the shoes of the Debenture Holder based on the Assignment Deed dated 04.03.2021.

In conclusion, the Tribunal found no merit in the Appellant's arguments and dismissed the appeal, upholding the Adjudicating Authority's order admitting the Section 7 application.

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